For a long time, I have wondered what lifestyle financial planning (LFP) actually means. I always thought I was implementing LFP to the optimum, but one day after a long, unplanned conversation with a client, I realized that my idea of LFP had shortfalls as I approached it in a segmented way and not holistically. It became clear to me exactly what LFP is. It’s not something concrete, but something extremely personal.
This is my view of true Lifestyle Financial Planning;
It is impossible to implement a financial plan for a client if you do not understand what their true personal lifestyle goals are. This cannot be obtained by just talking about how “they love to travel, or that they want to sit on their stoep at retirement age”, but rather to get more intricate details of their retirement vision, of who the person really is and to clearly understand what the client’s true values and morals are in life. The first step in understanding a client is to ask the correct questions and enable clients to share their life stories including their financial stories. The planner wants to discover the client’s most essential goals and aspirations before developing financial recommendations.
The whole concept of lifestyle financial planning is to truly make a difference in people’s lives. “I truly believe that by making a difference in the client’s life and by helping them obtain their lifestyle financial goal, the planner will also reach their lifestyle financial goal.”
We as human beings form opinions and create our own stories of people when we meet them for the first time. I have so many examples of where the story in my head did not match the client’s real story. Only after I truly get to know a client, can I determine what is truly important to them on a deep and personal level. I have been dumbstruck many times as to how different their personalities are and what they see as important in life to the picture formed in my head. The story or picture in my head can only be matched with the real picture or story if I spend enough time with the client, but more importantly if I ask the right questions. It goes without saying that a financial plan that I would have implemented compared to a lifestyle financial plan would have been very different and the client would have ended up with the wrong plan if the right questions have not been asked.
Only after the planner and client have established a lifestyle financial goal, should an investment strategy be implemented that speaks to this goal. With this step it is of utmost importance to explain and coach the client that these strategies have a goal that correlates with the client’s lifestyle goal, and even when markets are volatile they have to look at the long-term goal. It is extremely important for the planner to have the correct conversations with the client before the implementation stage. The client must understand that an investment strategy also has a goal to achieve, for example to beat inflation by a certain percentage and that should naturally fit in with the client’s goal over a certain period. These conversations can ensure that a client remains focused on their goals and make it easier for them to stick to their investment strategies.
I also believe that planners can only implement lifestyle financial planning with the correct experience and qualifications, e.g. a postgraduate diploma in financial planning. Without the advanced knowledge and deep understanding of financial planning, the advice you give can influence the client’s goal in a negative way and once again the client can end up with the wrong plan.
By implementing the steps above you create value to the client and it gives the planner a feeling of satisfaction where the planner can feel proud of the work he/she does. This will also help the planner or practice to build his wealth and in doing so achieving the planner’s lifestyle goals.
There will be a trusted relationship between the client and planner, and the client will see you as a professional, and maybe the most trusted professional in the client’s life. The relationship will be for life and even after with the rest of the client’s family.
“If the client reaches their financial lifestyle goals, the planner will also reach their financial lifestyle goals”.